Open Banking Paving the Road to Open Finance

The term "open banking" refers to everything linked to banking that is available to the public. Let's take a closer look at what open banking means in terms of technology and business. Open banking provides third-party financial service providers access to consumer banking, transactional data, and other relevant financial data from banks through application programming interfaces (APIs).?

So, What does this mean for Consumers?

Consumers need to approve and grant access to their data to third parties so that they can consume it. Now, why would a third party want to consume a consumer’s data? What value are they going to add to it?

The answer lies in the personalization of services that the existing banking system is not providing today. For ex- Loans, mortgage, insurance, etc. are some of the services which can be tailored by 3rd parties for a typical consumer and makes them more relevant to their needs. This can undoubtedly benefit consumers since now they have an array of services that are suitable for them.

What is the advantage to banks, what would they gain from it, and why would they disclose their customer information to third parties? The answer rests in two areas: monetization of current data and regulatory considerations. The data that banks have amassed over many years is a gold mine for them, and now is the moment to monetize it and profit more from it. Every single request made by a third party can be charged, and therefore income can be generated. In addition, several nations' regulatory agencies are requiring banks to share their data with third parties so that consumers may profit from it.

So, what's the result? Then, what's next? "Open Finance" is the way forward. An API interface is a new approach for banks and financial organizations to communicate data. As a result, all banks, fintech businesses, wallet providers, insurance companies, billers, and other entities will exchange data. When all this financial information is combined, it portrays a totally different image of the customer. Companies can use this information to build customized products and services for their clients. All transactions in the ecosystem, not only those involving banks, may be examined in one place and?used to create customized services for customers.

For?example, the bill payment transaction data can provide insights into all services the consumer is using; hence, the specific tailor-made offerings for that consumer can be made. Similarly, from the insurance data, the additional offerings can be made around vehicle service in the workshop. This creates a great ecosystem of sharing everything in one place, but consumer consent is needed to share this information with the ecosystem players.

Third-party EKYC verification service is another example where any service provider can verify the new consumer details with existing providers before onboarding them. This helps in quick onboarding with reduced risks. Some examples are - Income verification, Personal Finance Expense analysis, Risk assessment, Recurring expenditure analysis, etc.

Open finance also opens the developer space, allowing any organization or developer to offer services based on the data provided by the ecosystem's users. This has the potential to provide consumers with amazing experiences and services.

With all this data sharing and consumption across the ecosystem, a robust security mechanism must be in place so that data is not misused, and privacy is maintained. This can be achieved by using pseudo or alias references of the consumers while sharing data. When the final offerings are tailored, only the end consumer references are revealed, and that too within the platforms only so that no person can see the consumer's private data like name and so on.

Embark on the Journey Towards Open Finance with Panamax’s MobiFin

How would all this work from a technology perspective? We at Panamax provide a robust API-driven, Low code No Code most secured?digital banking platform?“MobiFin” which can seamlessly integrate with all ecosystem entities. We publish all our APIs for usage on standard web services for easy consumption and quick monetization. Consumer consent, Data privacy and security, and government regulatory compliance are some of the capabilities pre-built within the platform, and it is available on the cloud as SaaS (Software as a Service) model. The platform is driven by True microservices architecture with best-in-class ECC-256 bits security. The architecture is modular with software service building blocks (SSBB), enabling quick and easy deployment of new services. Hence, quicker GTM (Go to Market) and faster monetization of services is possible with “MobiFin”.

This article is originally published on Panamax Inc.